Germany Struggles to Emerge from Crisis after Govt. Talks Collapse

Germany's president was to start a difficult round of talks with party leaders Tuesday in a last-ditch attempt to save the EU's top economy from the political turmoil sparked by the collapse of Chancellor Angela Merkel's coalition talks.

Frank-Walter Steinmeier, who takes center stage because he can call snap elections, is expected to use his diplomatic skills as a two-time former foreign minister to persuade reluctant party chiefs to return to the negotiating table.

The head of state, who spoke with Merkel Monday, planned to meet with the left-leaning Greens at his Berlin Bellevue Castle and then, at 1500 GMT, with the pro-business Free Democrats (FDP), the party which pulled the pin on month-long coalition talks Monday.

Its shock decision to withdraw from a potential three-way alliance has thrown the government of caretaker chancellor Angela Merkel into chaos, leaving her with only bad choices: wooing reluctant coalition partners back to the table, running a minority government, or facing new elections.

"Germans are not natural fans of instability, minority governments or immediate repeat elections, to put it mildly," said Berenberg Bank chief economist Holger Schmieding on the unprecedented situation in German post-war politics.

New parliament speaker Wolfgang Schaeuble, the former finance minister, opened the legislature by reminding all parties of their promise to voters to deliver a stable government, but also conceded that no-one could be forced to join a government they don't want.

As Germany's usually staid and consensus-driven politics enter uncharted territory, Schaeuble, aged 75 and its longest-serving MP, stressed that it faces "a trial, not a crisis of state."

He underlined that its EU neighbors "need a Germany that is capable of action". In Brussels, the European Commission made clear that "Europe will not pause during this period."

- New protest party? -

Sitting in the glass-domed lower house of the German Bundestag for the first time were lawmakers of the far-right Alternative for Germany (AfD), the anti-immigration, anti-Islam and anti-Merkel protest party that is at the heart of the crisis.

Its entry into parliament in September 24 elections with almost 13 percent of the vote cost Merkel's conservatives and other mainstream parties dearly, further fragmented the party political landscape and made it harder to gain a parliamentary majority.

Merkel's headache was compounded when her former junior coalition partners, the center-left Social Democrats (SPD), scored a dismal election result and vowed to go into opposition, a decision they have so far refused to budge from.

A subsequent four-week negotiating marathon to forge a new governing alliance dubbed "Jamaica", after the parties' colors black, yellow and green, collapsed when the FDP pulled out.

The FDP's leader Christian Lindner, 38, insisted the party had acted on principle, but most political commentators saw it as a gambit to position itself as a slightly more moderate protest party and snatch away AfD votes in fresh elections.

Lindner is turning the FDP into "a bourgeois protest party that opposes a supposed left-liberal mainstream, and especially Merkel," judged Spiegel Online.

"His unspoken aim is: Merkel must go," the commentary added, using a common AfD slogan.

- Lame-duck government -

Germany now faces weeks, if not months, of paralysis with a lame-duck government that is unlikely to take bold policy action at home or on the European stage, as the EU faces issues from Brexit to ambitious French reforms plans for the bloc.

"The politics of Europe's most powerful economy -– and until recently its main anchor of stability -– has just entered a period of deep uncertainty," said Eurasia Group, a political risk consultancy.

To mediate in the crisis, Steinmeier was Wednesday due to meet his SPD party colleague Martin Schulz to sound out whether he would reconsider and once more team up with Merkel's bloc, a proposition the labor party chief has strongly rejected so far.

His party's former labour minister Andrea Nahles has suggested the SPD would tolerate a Merkel-led minority government, but this is an unstable option Merkel has dismissed.

Merkel in turn stressed Monday that if it came to fresh elections, likely not before February, she would be willing to run again, dismissing speculation that her 12-year reign is entering its twilight.